No capital gain tax on ‘Power of Attorney’ holder just because real owner didn’t file ITR: ITAT

During the assessment proceedings, the Assessing Officer noted that the assessee had sold immovable properties and earned long-term capital gains. The assessee submitted that he had only signed the documents by virtue of Power of Attorney (POA) executed by Mr. A and Mr. B, the original vendors of such sale transactions who were Non-resident Indian.

The Assessing Officer concluded that as assessee failed to furnish the residential address of the vendors and vendors didn’t file returns of income, he shall be considered as owner of the properties. Accordingly, the assessee was held liable to be taxed on the capital gain arising from sale of these properties.

On further appeal, the ITAT held in favour of assessee. It held that the copy of purchase agreement, power of attorney and sale deeds produced before AO, mentioned nowhere that the assessee was the real owner of the property or the consideration had been received by him. The residential address of the actual vendors was also mentioned in the Sale Deed as well as in the Power of Attorney. In spite of information about the residential address of real owner, the AO had not taken any initiative to make an enquiry with an intent to impose tax on capital gain upon them. Instead of doing so, he made the assessee liable for payment of tax. Therefore, as the properties didn’t belong to the assessee, capital gain arising from those properties couldn’t be taxed in his hands solely on the ground that the person being the real owners hadn’t filed their income-tax returns.